Echoes Of Professor Irving Fisher

Bank of America CEO Brian Moynihan went on record Thursday with the observation that US stocks keep heading higher because, as long as global interest rates remain low to negative, there’s nowhere else for investors to go. Ordinarily, we’d put Moynihan on our short list for the Irving Fisher Memorial Award.  Fisher, many of you will recall, was the eminent Yale economist who famously declared three days before the 1929 Crash that “Stock prices have reached what looks like a permanently high plateau.”

Everything’s Hunky-Dory

Moynihan, for his part, seemed not to be predicting much of anything; he was only stating the obvious. However, he is not entirely guiltless of stupidity, even if it’s the forgivable kind that we might expect from someone in the lending business big-time. “The consumer is in very good shape credit quality-wise, spending-wise,” Moynihan said on CNBC. Actually, we should like to point out, consumers who are mostly in hock up to their eyeballs merely appear to be in good shape because prices for stocks, bonds and real estate are sky-high.

Moynihan went on to say there’s room for more growth in commercial lending, implying he may be as optimistic about the economy as Prof. Fisher was in October 1929. Not to rain on the bankster's parade, but we would be negligent not to point out that in 2007, consumers appeared to be in great shape, surfing a tsunami of "wealth effect" until the moment the market for mortgage-backed securities collapsed. Could it happen again?  Even Moynihan knows the answer to that question — not that his interviewer on CNBC would deign to ask it.

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